ASX futures and a strong performance on Wall Street overnight bode well for the Australian markets today.
US shares were riding high on Tuesday. The Dow Jones was up 825 points or 2.8%, the S&P 500 moved up 3.1%, while the Nasdaq gained 3.3% or 361 points.
The banks were big winners, up 4.4%, as were Twitter shareholders, with the company’s fortunes rising 22.3% on the news that Elon Musk will consummate the on-again, off-again deal to purchase the company, to the tune of $54.20 a share.
Time to breathe out?
US jobs data provided some early signs that monetary policy is working, with job openings falling by the most in nearly 2.5 years in August.
And after the Reserve Bank’s smaller-than-expected rate hike of 25 basis points yesterday, perhaps investors are starting to breathe out – after all, it’s unlikely the bank will again ramp up in 50-basis-point increments from here.
Economists think we’ve reached the peak, and that from here there will be a series of smaller hikes until we top out at a cash rate of around 3.1% sometime in November or December.
This means borrowers should be feeling the worst pain at around Christmas time when interest rates will have fully filtered through.
The US dollar continues its ascent, leaving most major currencies in its wake. But while it is undeniably weaker against the greenback, the Aussie dollar is doing okay against other currencies such as the ailing pound and the yen.
Overnight the Australian dollar fell from highs near US65.45 cents to lows near US64.50 cents and was near US65 cents at the US close.
To cut or not to cut
With the UK Government’s reversal of its plan to remove the highest tax bracket of 45% following widespread outrage and chaos, the Australian Government is now under pressure to axe stage three tax cuts on the horizon, with many economists saying they’re a bad idea in the current climate.
Speaking to the ABC, Finance Minister Katy Gallagher wouldn’t be drawn on whether the government will let go of the policy: “Obviously what’s happening around the world is not irrelevant to us and we’re watching it very closely. Particularly the lessons learned from the UK in recent times are front of mind for us.
“We’re mindful of the decisions we’re taking as we’re putting the budget together about what’s happening in terms of the global outlook and there are some significant challenges there and we’re assessing those as we are finalising the October budget.
“Let’s not pretend that the economic circumstances aren’t changing and haven’t changed since May,” she added.
“Across the budget, we will make the right decision for the economic circumstances of the time. We’ve not changed our position on stage three, but we are finalising a budget and the Treasurer and I have been upfront about some of the challenges and some of the changes we’ve been seeing in the economy that are front of mind for us.”
In the opposing corner, shadow finance minister Jane Hume argued that the tax cuts would be good for the economy and hard to remove:
“I will be very interested to see how Labor could possibly walk away from an election commitment to provide already legislated lower, simpler and more effective taxes for 95% of Australians.”
In other news
Oil prices continued to rise on Tuesday, with traders still expecting OPEC+ oil producers to agree on a cut in production quotas of at least one million barrels per day – and up to two million according to some – when they meet later today in Vienna.
Brent crude rose by US$2.94 or 3.3% to US$91.80 a barrel, while US Nymex lifted by US$2.89 or 3.5% to US$86.52 a barrel.
Base metal prices were steady yesterday, with gains of between 0.8 and 6.0%. Aluminium led the charge, with tin the weakest performer.
Gold futures were up US$28.50 an ounce or 1.7% to US$1,730.50 an ounce, spot gold was trading near US$1,724 an ounce at the end of the day and iron ore futures rose by 99 US cents or 1.1% to US$95.21 a tonne.